NZBA rejects Australia comparisons and pledges reforms

The New Zealand Bankers' Association has rejected comparisons between the New Zealand and Australian banking sectors in the wake of the Royal Commission into Australian financial services, outlining reforms to “maintain public trust”.

Wednesday, May 2nd 2018, 3:50PM

by Dan Dunkley

The NZBA has responded to pressure from the Reserve Bank and Financial Markets Authority to detail evidence of how New Zealand banking culture differs from that in Australia after a raft of misconduct scandals emerged from Australia’s Royal Commission.

In an open letter to Reserve Bank governor Adrian Orr, and FMA chief executive Rob Everett, the NZBA said there were “indicators of strong culture” within the country’s banking system. The NZBA said New Zealand had “a different regulatory framework" to Australia, "which encourages open dialogue”.

The NZBA said New Zealand’s regulatory environment, “focused on consumer outcomes”, was a major difference between the two markets. The trade body also outlined contrasts between the two countries’ pension markets, adding Australia’s large superannuation scheme made regulation and enforcement “difficult”.

NZBA added New Zealand’s biggest banks were governed by independent boards that acted in the best interests of the banks, and not an “offshore parent”

Karen Scott-Howman, the chief executive of the NZBA, met with the Reserve Bank governor and the Banking Ombudsman on Monday to discuss the Royal Commission. Scott-Howman described the meeting as “constructive”, in the open letter.

The NZBA pledged its full support to “any response” from the Reserve Bank or regulators and added: “The public has a right to expect assurance and we acknowledge the key role we play in delivering that message.”

To alleviate regulatory concerns, NBZA has pledged a series of reforms to “maintain public trust”. These include adopting the findings of the Sedgwick Review into Australian retail banking to the New Zealand market, and adopting a industry-wide whistleblowers’ standard for identifying malpractice.

The NZBA also suggested forming a “bad conduct register” for reporting conduct that “falls below standards” expected by customers and regulators. The trade body said a register could potentially be included in the Financial Services Legislation Amendment Bill, and a consultation process was "currently underway".

The trade body has also suggested banks should supply extra funding for regulators, and has promised to raise the profile of the NZBA’s Revised Code of Conduct. The NZBA also promised to provide the Banking Ombudsman with further information on banks’ internal dispute resolution schemes.